Punjab, UP poll promises take aim at farmers

A key focus of the poll manifestos of the Bharatiya Janata Party (BJP) and the others in the agrarian states of Punjab and Uttar Pradesh is farmers.

Both states are battling agrarian distress. Farmer suicides, sugarcane farmers not receiving payments and poor returns for produce are all issues.

In their manifestos for the Punjab election, due on February 4, all three big contenders — the Shiromani Akali Dal-BJP combine, the Aam Aadmi Party (AAP) and the Congress – have promised crop loan waivers. In Punjab, the Akalis have even promised leasing of 100,000 acres abroad, including in the US and Canada, to settle farmers from the state.

In UP, the BJP has committed to waiving crop loans and providing interest-free loans to small and marginal farmers. In the manifesto released on Saturday in Lucknow by party chief Amit Shah, the BJP has also promised to pay all the dues of sugarcane farmers within 120 days of forming a government.

Experts say state governments can at best waive  only a small part of farmers’ loans. Most growers take loans from nationalised banks and a big  waiver can only be done at the central level. All that governments can do at the state is waive loans taken from state cooperatives and other state-level financial institutions. The share of these is barely a third of all loans. It is estimated that 65-70 per cent of all farm credit in a financial year is from scheduled commercial banks, not covered under any loan waiver.

“Loan waivers largely benefit big farmers, as small and marginal farmers have little access to formal credit systems,” says S Mahendra Dev, director of the Indira Gandhi Institute of Development Research, Mumbai.

Such warnings do not deter politicians. In one of her first decisions after being re-elected in mid-2016, then Tamil Nadu chief minister J Jayalalithaa issued orders to waive Rs 5,780 crore of loans taken by small and marginal farmers from cooperative banks.

In Punjab, the Congress’ chief ministerial candidate, Amarinder Singh, has said one of his first decisions, if he were to form the next government, would be to waive farmers’ debts. AAP chief Arvind Kejriwal, whose party has released a manifesto aimed exclusively at the farmers of Punjab, has also promised a loan waiver. 

 

Congress vice-president Rahul Gandhi has pressed the central government for a farm loan waiver worth Rs 49,000 crore in Uttar Pradesh, a seventh of the state government’s Budget of Rs 346,935 crore in 2016-17. Congress leaders in Punjab have threatened an agitation if the Akali-BJP government does not announce a Rs 57,000-crore waiver. Punjab Agricultural University estimates the total farm indebtedness in the state at Rs 69,355 crore. Of the Punjab’s government’s 2016-17 Budget of Rs 86,387 crore, as much as Rs 5,600 crore was allocated as a free power subsidy to farmers. The state government’s finances are in a mess and it will be an uphill task for any government to deliver on a debt waiver. The free power to farmers and other sops have meant the state government owes Rs 1.24 lakh crore and industrial activity has slowed significantly.

Uttar Pradesh CM Akhilesh Yadav, while presenting the Budget last year, had said the estimated debt burden of the state could reach Rs 293,200 crore by the end of the financial year.

T Haque, former chairman of the Commission for Agricultural Costs and Prices, who is heading a NITI Aayog committee on model land lease laws, says loan waivers should never be attempted. “It will lead to collapse of the banking system.” Haque said farmers instead prefer appropriate, adequate and timely farm credit. Short-term loans for seeds and equipment can be provided at subsidised rates after two drought years.

“Farm loan waivers are a reaction to a crisis that only helps one-third of farmers. It is not a permanent solution,” said Ajay Jakhar, chairman of the Bharat Krishak Samaj. Around 40 per cent of the country’s farmers do not have access to institutional credit. Of the rest, some might have repaid their loans. “It remains to be seen how many farmers actually benefit from these loan waivers.”

According to estimates, the Akali Dal’s promise of a Rs 100 a quintal fertiliser incentive is likely to cost the state Rs 2,700 crore, calculated on the basis of the recent procurement of 10.6 million tonnes of wheat and 16.5 mt paddy.